Frank Stronach is reluctantly giving up control of Magna, the huge auto parts business he has built worldwide
. The move, if approved by shareholders, would leave Magna without a major shareholder and potentially vulnerable to a takeover, according to The Globe and Mail.
Stronach would receive an $863 million buyout of his multiple voting shares that have given him control of Magna, after which he would hold a 7.44% stake in the company. He would receive $300 million and nine million shares of Class 'A' shares in return for surrendering the multiple voting Class 'B' shares first issued to him 32 years ago, according to the paper.
“It took a lot of reflection, a lot of soul searching,” Stronach said yesterday in announcing his decision to agree to the management proposal to step down. “We still have a strong voice because we have a lot of shares,” he said, but The Globe and Mail said the 77-year-old Stronach seemed, despite preaching for years about the need to shelter Magna from the influence of institutional shareholders concerned only about short term financial performance, to have little concern about the possibility of the company he founded 53 years ago being left in control of public investors.
Stronach will remain chairman of Magna and receive consulting fees for the next four years. He will invest $80 million to hold a 27% share to lead a new Magna division created to develop electric cars.
Major company executives differ with Stronach on the future of electric cars, which he says could generate $20 billion in revenue for Magna in 10 years.
Analysts were stunned by his decision to relinquish control -- one saying he had been with the company for 23 years and never thought he would see it happen -- but Stronach said, “I realize I can’t manage the company from the grave.”
One person said Stronach’s decision would leave his daughter Belinda with a higher premium than she would have received if she inherited Stronach’s stake and then sold it a few years later.
(Harness Tracks of America)